The Illness of and Medicine for Corporate Crony Incentives

With a mention of the questionable benefit from having wooed General Electric to Boston with $150 million in subsidies, Boston Globe columnist Jeff Jacoby argues against the crony-capitalist bribing of companies to locate within a jurisdiction:

Amazon says it is seeking to build its new home in a metropolitan area with a large population, an international airport, and good schools. But as everyone understands, it also expect to be courted with publicly-funded “incentives” — some combination of property-tax abatements, job-creation credits, direct grants, sales-tax refunds, land-acquisition assistance, and the other varieties of corporate welfare that governments have concocted to lure businesses. Amazon knows how the economic-redevelopment game is played in what The Economist calls this “sweet land of subsidy.” (Just this week, Wisconsin agreed to pay Foxconn a staggering $3 billion in subsidies to construct a flat-screen factory in the state.) If cities and states are determined to compete for Amazon’s new campus by showering it with fistfuls of taxpayer dollars, the company can’t be blamed for pocketing the largesse.

But what excuse do mayors and governors have? Again and again they spend taxpayers’ funds to woo companies in this way. Again and again the taxpayers get jilted.

Yet, this is the strategy that our Democrat governor, Gina Raimondo, wishes to expand in her recently proposed budget, including special subsidies to lower-end cronies, from students to small businesses. Under this model, the government makes it unreasonably difficult for individuals and businesses to act economically and then tries to take credit for easing the burden with subsidies… for those individuals and businesses willing to kneel before the bureaucrats and be bought into the game.

By way of a bigger-picture medicine for this hard-to-kick mental disease, I like Glenn Reynolds’s suggestion:

State tax abatements and other “incentives” should be treated as taxable income at the federal level. States should be encouraged to have low taxes for every company, not just the favored few.

“subsidies”, politicians are like bankers, they only do what the guy down the street is doing. Worse, they feel they have to do it. I’ve mentioned that I am a taxpayer in Attleboro, so I watch things. About 2 years ago, they paid a storm window company $50,000 to move to Attleboro. Having moved from two towns over, there is no good reason to think they were bringing potential homeowners and “taxpayers” with them. The only explanation offered in the newspaper was along the lines of “everybody is doing it”.